Case Law Details
Klin Industries Vs ACIT (ITAT Rajkot)
The Income Tax Appellate Tribunal (ITAT), Rajkot Bench, disposed of three appeals filed by the assessee relating to Assessment Years 2014-15 and 2016-17 against penalty orders passed under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal noted that one of the appeals for A.Y. 2014-15 was merely a duplication because an earlier appeal for the same assessment year had already been decided by the Tribunal through an order dated 15.01.2026, wherein the penalty was deleted on the ground that the notice issued under Section 271(1)(c) was defective. Since the assessee had already obtained relief, the duplicate appeal was treated as withdrawn and dismissed accordingly.
The remaining two appeals related to A.Y. 2016-17 and concerned penalties of Rs. 6,81,564 imposed under Section 271(1)(c). During assessment proceedings, the Assessing Officer had made quantum additions and the assessee paid the entire tax demand arising from those additions. However, the Assessing Officer subsequently imposed penalties under Section 271(1)(c). The assessee contended that the penalty notice was defective, that the specific charge under Section 271(1)(c) was not clearly identified, and that no penalty should be levied since the tax demand had already been paid. The assessee also relied on the Tribunal’s earlier decision for A.Y. 2014-15, where penalty had been deleted on identical facts.
The Tribunal examined the facts and observed that the assessee had paid the entire tax and demand raised during the quantum proceedings and had not challenged the assessment before the Commissioner (Appeals). It further noted that full and true disclosures had been made in the return of income, tax audit report, and during scrutiny assessment under Section 143(3). The return disclosed gross income, the deduction claimed under Section 80JJA, and all particulars necessary for computing Alternate Minimum Tax (AMT). The Tribunal recorded that the AMT was calculated solely on the basis of figures already disclosed by the assessee and that nothing had been concealed. According to the Tribunal, the issue arose from an unintentional, inadvertent, and bona fide mistake in tax computation rather than concealment of income or deliberate furnishing of inaccurate particulars.
The Tribunal referred to judicial precedents cited before it and observed that every disallowance or adjustment does not automatically warrant imposition of penalty. It noted that where relevant facts have been fully disclosed, the question of concealment does not arise. The Tribunal also referred to decisions holding that a bona fide claim or computational error, when accompanied by full disclosure of facts, should not automatically attract penalty under Section 271(1)(c).
After considering the explanations furnished by the assessee, the Tribunal concluded that sufficient cause had been demonstrated for non-imposition of penalty. It found that the penalties arose merely from adjustments made by the Assessing Officer and that there was no conscious concealment of income by the assessee. Since the facts in both appeals for A.Y. 2016-17 were identical, the Tribunal held that the penalties imposed under Section 271(1)(c) in both cases were not sustainable. Accordingly, both penalties were deleted and the appeals for A.Y. 2016-17 were allowed, while the duplicate appeal for A.Y. 2014-15 was dismissed as withdrawn.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned three appeals filed by the Assessee, pertaining to Assessment Years 2014-15 & 2016-17, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeal), National Faceless Appeal, Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], all dated 31.10.2025, which in turn arise out of separate penalty orders passed by the Assessing Officer (`AO), u/s.271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’).
2. Since, all three appeals relate to the same assessee and identical facts and issue are involved; therefore, all these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
3. At the outset, Ld. Counsel for the assessee submitted that appeal of the assessee in ITA No.862/Rjt/2025, for assessment year (A.Y.) 2014-15, has already been adjudicated by the ITAT- Rajkot, Bench in ITA No.857/Rjt/2025 for A.Y. 2014-15 vide order dated 15.01.2026, wherein Tribunal held as follows:
“10. On identical facts, I also rely on the judgement of Hon’ble Bombay High Court in the case of Mohd. Farhan A Shaikh vs. Deputy Commissioner of Income-tax, Central Circle-1, Belgaum [2021] 125 taxmann.com 253 (Bom)/[2021] wherein the penalty u/s 271(1)(c) was deleted on account of defective penalty notice u/s 271(1)(c) of the Act. The Hon’ble Bombay High Court held that assessment order clearly records satisfaction for imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), a mere defect in notice not striking off irrelevant matter would vitiate penalty proceedings. Considering these facts, and the precedents applicable to these facts, I am of the view that penalty should not be imposed on the assessee. Accordingly, I delete the penalty u/s 271(1)(c) of the Act, and allow the appeal of the assessee.
11. Since, I have deleted the penalty, based on the technical ground, “being notice under section 271(1) (c) of the Act defective”, therefore, other arguments advanced by the learned Counsel for the assessee, on merit of the case, rendered academic and infructuous hence, do not require adjudication.”
4. Since, the Tribunal has allowed the appeal of the assessee and deleted the penalty for assessment year (A.Y.) 2014-15, vide ITA No.857/Rjt/2025, in the assessee’s case (Klin Industries vs. ACIT), vide order dated 15.01.2026, wherein penalty has been deleted by this Tribunal, therefore, the appeal filed by the assessee in ITA No.862/RW2025 for A.Y. 2014-15 is just a duplication. Therefore, this appeal of the assessee in ITA No.862/Rjt/2025 for A.Y. 2014-15 should be treated as withdrawn by the assessee, as the assessee has already been given benefit by this Tribunal. Hence, this appeal is treated as a duplication and therefore, the same is dismissed, as withdrawn.
5. Now, coming to the assessee’s appeals in ITA Nos. 863/RW2025 for A.Y. 2016-17 & ITA No.858/Rjt/2025 for A.Y. 2016-17.
6. Grounds of appeal raised by the assessee in ITA Nos. 858 & 863/Rjt/2025 for A.Y. 2016-17, are similar and identical, which are reproduced below:
“1. That the Learned NFAC has erred in law and on facts in confirming penalty of Rs.6,81,564/- u/s 271(1)(c) of the Act. The penalty deserves to be deleted.
2. That the penalty order is invalid as the specific limb (concealment vs. inaccurate particulars) is not clearly identified nor supported by a clear finding in the assessment-order.
3. That the Learned NFAC has grossly erred in law and on facts by confirming the penalty of Rs.6,81,564/-, under Section 271(1)(c) of the Act, despite the .final tax liability for A.Y. 2016-17 having been determined and levied exclusively under the deemed provisions of Section 115JC (AMT) of the Act.
4. That the Ld NFAC, Authorities failed to appreciate that the case is covered by reasonable cause u/s 273B, hence no penalty is leviable.
5. The Appellant reserves liberty to add, alter, amend, modify, or withdraw any grounds of appeal at the time of hearing.”
7. I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Succinct facts are that in respect of ITA No.863/Rjt/2025 for A.Y. 2016-17, which is against the penalty order of the assessing officer u/s.271(1)(c) of the Act and assessee’s appeal in ITA No.858/RW2025 for A.Y. 2016-17, is also against the penalty levied by the assessing officer u/s.271(1)(c) of the Act. During the assessment proceedings, the assessing officer made quantum addition in the hands of the assessee. The assessee paid the entire income tax on the quantum addition made by the assessing officer. However, the assessing officer, imposed the penalty under section 271(1) (c) of the Act. The assessee argued before the assessing officer that since it had paid the entire taxes imposed by the assessing officer on the quantum additions, hence in these circumstances, no penalty under section 271(1) (c) may be imposed. The assessee also argued before the assessing officer that penalty notice is also defective as the charge of the penalty in the assessment order, and in the penalty order is different, hence, no penalty should be imposed on the assessee. However, assessing officer rejected the contention of the assessee and imposed the penalties under section 271(1) (c) of the Act, on the assessee.
8. Aggrieved by the order of the assessing officer, the assessed carried the matter in appeal before the ld. CIT(A), who has also confirmed the addition made by the assessing officer, therefore, the assessee is in further appeal before this Tribunal. The Ld. Counsel for the assessee submitted that in case of these two appeals, the assessee has paid the entire demand raised by the assessing officer in respect of various additions made by the assessing officer during the assessment proceedings. Since the entire taxes have been paid by the assessee on the various additions made by the assessing officer, and therefore, the assessee did not file appeal in respect of quantum proceedings before the ld.CIT(A), pertaining to A.Y. 2016-17. Therefore, the penalty imposed on the assessee should be deleted, as the assessee had paid the entire tax and entire demand raised by the assessing officer. Moreover, the Ld. Counsel for the assessee submitted that in the assessee’s case for A.Y. 2014-15, the penalty had already been deleted by this Tribunal, on identical facts. Therefore, the penalty imposed by the assessing officer uls.271(1)(c) of the Act in both the appeals should also be deleted.
9. On the other hand, Ld. DR for the Revenue relied on the findings of the assessing officer.
10. I have heard the Learned Counsel appearing on behalf of the respective parties at length. I note that in these two appeals, the assessee has explained reasonable cause not to impose the penalty. In fact, the assessee has deposited the entire tax and demand raised by the assessing officer, in the quantum proceedings. Since, in the quantum proceedings, the assessee has admitted and paid the entire tax to buy the peace of mind and therefore, the penalty should not be imposed as per Ld. Counsel for the assessee. I have also gone through the facts of the assessee’s case and noted that assessee had paid the entire demand raised by the assessing officer in the quantum proceedings, however, did not file the appeal before the learned CIT (A), in quantum proceedings.
11. I also note that full and true disclosure has been made in ITR and in Audit Report and at the time of scrutiny assessment u/s 143(3) of the Act. The ITR is filed on 12.10.2016 declaring Gross Income Rs. 35,76,828/- and deduction claimed u/s 80JJA of Rs. 35.76 Lakh and declared total income Rs. NIL.The Return of Income is accompanied by Audit Report u/s 44AB of the Act. The AMT Rs. 6,77,255/- paid immediately and not claimed in ITR. All the particulars required to calculate the AMT was disclosed before the assessing officer. The AMT is calculated u/s 143(3) of the Act, solely based on the figures already disclosed and nothing is concealed by the assessee. It is unintentional, inadvertent and Bonafide mistake of tax calculation. It is neither concealment of income nor deliberate furnishing of inaccurate particulars of income by the assessee. Therefore, I note that every disallowance cannot be automatically penalised. The Co-ordinate Bench of ITAT Ahmedabad in the case of INDIAN CHRONICLE LTD. V. ITO (Ahd -Trib.) 2024 ITL 6182 , held that:
“Para 12. On merit also, we do not find any reason to impose the penalty. The fact that the assessee had earned LTCG exempt u/s. 10(38) of the Act, was duly disclosed in the return of income, in the tax audit report and also in the annual accounts. Under these circumstances, no penalty u/s. 271(1)(c) of the Act could have been imposed for concealment of Income. The question of concealment would arise only if the relevant fact regarding earning of exempt LTCG was not disclosed by the assessee in the return of income.”
12. The Hon’ble Supreme Court in the case of CIT v. Reliance petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) held that bonafide claim/deduction disallowed by the assessing officer cannot automatically penalised u/s 271(1)(C) of the Act. The Hon’ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. v. CIT (2012) 348 ITR 306 (SC) held that Penalty should be deleted where a computational error occurred due to an oversight, and the facts were fully disclosed. Therefore, I find that the assessee has explained the sufficient cause stating that penalty u/s.271(1)(c) of the Act should not be imposed and these penalties are merely on certain adjustments made by the assessing officer and hence, there is no any conscious concealment of income, on the part of the assessee. I find that facts remained same in ITA No.863/Rjt/2025, which is akin to facts mentioned in ITA No.858/Rjt/2025, therefore, penalties imposed by the assessing officer in both appeals of the assessee should be deleted. Accordingly, I delete both penalties under section 271(1) (c) of the Act, and allow both the appeals of the assessee.
13. In the combined result, both the appeals filed by the assessee in ITA Nos. 858 & 863/Rjt/2025, are allowed and assessee’s appeal in ITA No.862/Rjt/2025 for A. Y. 2014-15 is dismissed as withdrawn.
Order is pronounced in the open court on 15/05/2026.
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